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This month’s rally has rocketed cocoa prices to their highest levels in nearly a year, as weekend news from the Ivory Coast brought the potential of an extended supply disruption much closer to reality. Opposition candidate (and presumptive winner) Ouattara called for a one-month export ban of cocoa and coffee, with the intention of cutting off revenues to the incumbent President Gbagbo. After the initial thrust higher, March cocoa then fell more than $100 off of its early highs when first reports indicated that many Ivory Coast export firms were functioning normally. A report that 300,000 tonnes of cocoa had already completed registration and were eligible for export added further weight to the pullback. However, later news that a major multi-national commercial firm was suspending their cocoa bean purchases from the Ivory Coast provided further support for the market. There has been support for the export ban from the US, but the EU has stated that a trade ban for Ivory Coast cocoa would be unlikely. A major Dutch cocoa processing facility that was damaged by fire last week is projected to be back at full capacity by the second half of next month. The reluctance of several European cocoa trade associations to immediately follow along with the export ban, along with a portion of the Ivory Coast cocoa export industry continuing with “business as usual” could nullify any disruptive effect that the export ban has on the flow of cocoa out of the Ivory Coast. With supplies already going overland to Ghana for shipment, and with those 300,000 tonnes already approved for export, the potential amount of cocoa held off the market could easily fail to match initial expectations.
TODAY’S GUIDANCE: With a bearish tilt to outside markets today, it will take a steady flow of negative news to see the market hold onto recent gains. The market has been up 9 of the past 10 sessions and is due for a correction, and there are a number of possible events that could spark increased selling.
Cocoa: Ivory Coast Supports but Outside Markets Pressure
by Terry Roggensack on January 25, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
This month’s rally has rocketed cocoa prices to their highest levels in nearly a year, as weekend news from the Ivory Coast brought the potential of an extended supply disruption much closer to reality. Opposition candidate (and presumptive winner) Ouattara called for a one-month export ban of cocoa and coffee, with the intention of cutting off revenues to the incumbent President Gbagbo. After the initial thrust higher, March cocoa then fell more than $100 off of its early highs when first reports indicated that many Ivory Coast export firms were functioning normally. A report that 300,000 tonnes of cocoa had already completed registration and were eligible for export added further weight to the pullback. However, later news that a major multi-national commercial firm was suspending their cocoa bean purchases from the Ivory Coast provided further support for the market. There has been support for the export ban from the US, but the EU has stated that a trade ban for Ivory Coast cocoa would be unlikely. A major Dutch cocoa processing facility that was damaged by fire last week is projected to be back at full capacity by the second half of next month. The reluctance of several European cocoa trade associations to immediately follow along with the export ban, along with a portion of the Ivory Coast cocoa export industry continuing with “business as usual” could nullify any disruptive effect that the export ban has on the flow of cocoa out of the Ivory Coast. With supplies already going overland to Ghana for shipment, and with those 300,000 tonnes already approved for export, the potential amount of cocoa held off the market could easily fail to match initial expectations.
TODAY’S GUIDANCE: With a bearish tilt to outside markets today, it will take a steady flow of negative news to see the market hold onto recent gains. The market has been up 9 of the past 10 sessions and is due for a correction, and there are a number of possible events that could spark increased selling.
Tags: Cocoa, Softs
About Terry Roggensack